Finding Value—the tip of the iceberg

March 30, 2008 at 3:44 pm Leave a comment

The current soft market is illustrating one of my long held principles as a realtor:   value, as indicated by a property that goes up the most in an “up” market and down the least in a “down” market, is not purely a matter of location.

While prices on the Westside in general and Santa Monica in particular are holding up better than other parts of Los Angeles County and the rest of California, it’s instructive to pay attention to details.   The very best properties, the tip of the real estate iceberg, assuming they have credible listing prices, are still selling quickly, some even with multiple offers.

But if that three-bedroom house is on a busy street it will take longer to sell, and at a disproportionately lower price, than its uncompromised neighbor two blocks over.   That two-bedroom condo with less than 900 square feet of living space will be a much more difficult sell than the one in the same neighborhood with more than 1,200 square feet, even though the latter has a higher asking price.

There’s a line of conventional wisdom about real estate that says one should buy the worst property in the best location one can afford.   I disagree.    If you put all the properties in an area on a 1-100 scale, I recommend not buying any home at 25 or below.   Don’t buy on the busy street, don’t buy the excessively small, don’t buy the house across the street from a fire station.   Instead, if building and sustaining value is among your top priorities, find a home that doesn’t have any of these incurable defects.

Contrariwise, if you really need “bang for the buck,” getting some combination of larger/newer/nicer, then these homes with the incurable defects are exactly the properties you should look at.  But remember, the “deal” you get on the front end when you buy is the same deal you will have to give on the back end when you eventually sell.   You’ll be able to meet your daily needs at the cost of reduced appreciation.

As your realtor, I can help you understand and weigh these trade-offs.

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Entry filed under: Market Conditions, Santa Monica real estate, Santa Monica realtor, Tips.

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